How to Start a Coffee Shop Business
Starting a coffee shop, or any other type of coffee business is a great way to earn a living in an interesting industry while also actively participating in your surrounding community.
The three main ways most entrepreneurs start coffee shops are:
- Starting a coffee shop business from scratch
- Opening a coffee shop franchise
- Buying an existing coffee shop business
Inspired by coffee professionals, our guides will steer you through the necessary steps to make your coffee dreams real, from picking a location to buying equipment, sourcing beans, hiring baristas, choosing a POS system, forming an actual company, and everything in between.
Steps to Start a Coffee Shop Business
Step One: Research and Make a Coffee Shop Business Plan
A strong coffee shop business plan is a good first step towards building a profitable company. A business plan should have enough structure to give you firm footing, but enough flexibility to allow for growth as it is an ever-changing document. You'll also want to know the type of coffee shop business to open, like a traditional coffee shop, a coffee roaster, a mobile coffee cart, or other types of businesses, as well as how much everything will cost to start.
Also important to this planning stage is how to do research and find connections in the industry. Networking will always get you further than some Google searches when it comes to valuable information that will help you succeed. The next things we discuss are the costs to start your business and what essential items go into your budget. We wrap it up with a resource for starting your business plan.
Step 2: Find a Target Market and Define Brand
The next step in starting your coffee business is developing your marketing and brand strategies. In this guide, we focus on who makes your business successful: your customers and yourself. Your customers should be at the heart of your marketing strategy, especially because your business will bring in different types of customers. Ask yourself what they need and desire from your establishment.
Categorize your customers into specific target markets. Do you operate your business near a university? Expect students wanting a place to study or socialize. Do you operate in a residential area? Parents might want to stop in for a quick coffee on their morning route.
When you think of these people as you develop a marketing strategy, think of how best to reach out to them. As helpful, successful coffee owners discuss what worked for their marketing, they highlight the importance of creating engaging social media for your business.
Developing a brand strategy involves thinking of yourself next. How can your unique story give meaning to your brand?
You can’t have a brand without the right equipment to make your business a success. That’s why we asked our coffee entrepreneurs about how to source products and equipment. Again, they emphasized how important it is to connect with people in this industry.
Step 3: Form the Business And Launch
This is the guide that will actually put what you're doing into a business structure, with all the permissions it needs to do business. With our resources on how to start an LLC, and other topics like you can easily move forward into the next stages of opening your business.
Learn how to pick a great location by listening to the success stories of professionals in our video. One of the most beneficial things you can do is choose a convenient spot where the surrounding tenants bring in a lot of traffic.
Read our guide on the best Point-of-Sale (POS) systems. Cash registers are a thing of the past. Most shops have smart POS systems that make it easy for you to keep track of inventory and sales from the comfort of your home. Our guide covers various factors to consider while making a choice on POS systems.
Just as important as picking a good location is making sure that space has everything it needs to support your business, like the right amount of electrical power, for example.
You'll learn that you need to put in a great deal of work in order to get a turnout for your opening day. Part of making that opening day a success is to hire and train the right kind of staff.
You want your customers to feel the culture of your business right away, and the staff you hire contribute to that atmosphere. Learn what coffee entrepreneurs think are the best traits to look for in a new hire. Any skill can be learned; personalities make the culture of your business thrive.
Step 4: Take Care Of Day-to-Day Operations
Ever wonder what it looks like to run a coffee business day-to-day? It includes a lot of work hours. If you want your business to be popular, you need to commit.
All of the technology and equipment your business uses will likely need regular maintenance in order to keep your sales flowing. This means you’re going to need to be ready for problems on a daily basis. Watch our guide to listen to how coffee entrepreneurs put themselves in the right mindset for being an efficient problem-solver.
You’ll also learn some tips for balancing work and play as they try to set a healthy example for staff. As busy as you’ll be owning a business, you (and your hardworking employees) should take the time to relax. Since you’re probably going to be on your feet a lot, it’s important to do things like stretching or yoga so you can be your best self every day.
Step 5: Think About How To Grow
The final part of this guide deals with what happens after you get your footing in running your business.
You could take your business in any direction. Before you think of growing, consider how well your current business is performing. Does every little thing feel right? Do you have a high-quality team?
After thinking it over, you could expand your product lines, get more space, or even grow into a franchise. But don’t take on too much at once. It all depends on what you want your business to be.
Coffee experts advise entrepreneurs to stay consistent with their original purpose and brand. Other than that, you need to put thought into the future and what your cash flow will be like down the road. Financial changes are likely and you don’t want to be caught off guard.
Watch this guide to see the importance that coffee experts place on listening to customers in order to expand their community. Even competition can be a part of that community if you have a positive attitude.
TRUiC presents “Starting a Coffee Shop Business”: A Documentary Series
Our video guides feature advice and personal stories from these Michigan coffee companies & experts:
- John Roos, RoosRoast
- Maliesha Pullano, Mamaleelu Cold Brew
- Marcus Goller, Brighton Coffeehouse and Theater
- Lisa Bee, Sweetwaters Coffee & Tea
- Jess Harmon, Coffee Expert
See the full Starting a Coffee Shop Business Playlist to watch all of the videos.
Subscribe to our YouTube channel
How Much Does it Cost to Start a Coffee Shop?
The cost of starting a coffee shop depends on a few variables like your location, size, and what type of shop you’d like to open. Generally, a coffee shop could cost anywhere from $80,000 to $250,000.
If you’re starting a business from scratch, a lot of your money will be used on a location and all the necessary equipment. Thankfully, we have a resource to help you sort through the required equipment for starting a coffee business.
Not only do you have to pay the rent on your new location, but you also have to keep in mind any repairs that need to be made or building codes that need to be addressed.
The first thing you’ll need if you want to operate a franchise business is a franchise fee, which ranges anywhere from $10,000 - $50,000 or more depending on the franchise.
Franchisees usually pay an ongoing franchise fee or royalty. This is usually a percentage of the gross revenue. The average royalty percentage is 5 to 6 percent, but this can vary.
The royalty could also be a fixed amount no matter the revenue.
Marketing fees are likely to be another cost if you’re a franchise. Oftentimes there is an advertising or marketing fund that every franchise in the region or country contributes to. This fee will also be either a fixed amount or percentage, likely in the 1-4 percent range.
Another possible cost is for products or services that the franchisor requires.
If this sounds like a good idea for you, take a look at our Coffee Shop Franchising Guide.
How to Hire for a Coffee Shop
You want to hire good employees for your brand-new business. We can help with that. Check out our Hiring Guide.
If you don’t want to be both the owner and the general manager, you’ll need to think carefully about who to hire for this important role. It will benefit you to look for someone who’s had a background in management and who’s had experience with keeping calm in the face of customer complaints.
Someone needs to serve the drinks. Since baristas are the face of your company, you need to hire them wisely. Look for someone who will be an engaging, friendly barista. Anyone can be trained to make coffee, but that positive attitude is hard to come by.
How to Name Your Coffee Shop
Unless you are franchising, choosing a name for your coffee shop may be the most important first step. There are many factors to consider when choosing a name. We've included some of them below:
- How do you want your coffee shop to be perceived?
- Are there specific emotions you want to elicit in your customers?
- Can you use the coffee shop location in the name?
Different Coffee Business Ideas
If you love high-quality roasted coffee, maybe you want to try to make it yourself. The big piece of equipment you need to make this business idea work is your coffee roaster. It’s important to research as much as possible in order to make a good choice. Getting a coffee roaster can cost as little as $400 or as much as $58,000.
A coffee cart might be a great option for you if you want a highly portable and flexible business. You need a profitable venue where there’s foot traffic in order to make this idea work, as well as a cart, which could cost up to $20,000 if it includes all of the things you would need.
Coffee Kiosk or Stand
A coffee kiosk is different than a coffee cart in that it gives you more counter and refrigeration space because it’s a more permanent structure than a cart. A kiosk would allow you to expand beyond the typical espresso bar model to include additional products. You could spend anywhere from $15,000 to $80,000 to start your kiosk.
Drive-Thru Coffee Shop
If you value a fast-paced environment and quality customer service, maybe opening a drive-thru coffee shop is the way you can show your love of coffee to the world. The price for opening a drive-thru coffee shop varies from $35,000 to $80,000.
Do you love cats too? Combine your passion for cats and coffee by starting a cat cafe, a popular concept in Asia but one that is just finding its footing here in the States. Having a cat cafe will call for additional costs than a regular cafe because of all the cat-care you’ll need to provide. You might need around $100,000 for this quirky idea.